Greystone Leads Effort to Upgrade Rural Housing

Shortages of affordable, low-income housing are reaching crisis proportions in some parts of the U.S.

Plantation Apartments in Richmond Hill, Ga. New York finance firm Greystone & Co. has teamed up with federal and state agencies in Georgia to preserve 1,310 low-income rental apartments built in the 1970s and 1980s by the Agriculture Department for rural households.

New York housing-finance firm Greystone & Co. has teamed up with federal and state agencies in a $168.6 million effort to preserve and recapitalize 1,310 low-income rental apartments in Georgia.

The units, developed and managed by Atlanta-based Hallmark Cos., were built in the 1970s and 1980s through a U.S. Agriculture Department program targeting rural households. Tenants, who are required to meet income-eligibility requirements, pay about $400 to $500 a month in rent.

The portfolio includes 26 properties in 17 counties. Like tens of thousands of other properties developed under federal housing programs, the Georgia homes are badly in need of repair.

The deal, known as a recapitalization, provided funds for upgrades worth an average of $37,000 per unit, including such improvements as new appliances, counters, cabinets and electrical systems. The recapitalization also involved a sale of the properties and a refinancing of the debt on the portfolio. Through those actions, enough surplus capital is being raised to pay for the improvements.

“Unless you do something creative, they really have no chance of being preserved,” said Tanya Eastwood, president of Greystone’s affordable-housing redevelopment unit.

The sellers of the properties were the limited partners who decades ago provided equity financing to Hallmark for their development, mostly in exchange for tax credits. The new owner is a venture of Hallmark and new equity investors who also are getting returns primarily in the form of low-income-housing tax credits.

The units are being preserved at a time when shortages of affordable and low-income housing are reaching crisis proportions in some parts of the country. According to a recent report by the National Low Income Housing Coalition, the U.S. has a shortage of more than 7.2 million units for “extremely low income” renter households.

Hundreds of thousands of units are at risk of becoming unusable, housing advocates say. “There’s obviously a great need for more affordable housing, but we also can’t afford to lose any of the existing,” Ms. Eastwood said. The program in Georgia “allows us to prevent the crisis from getting worse.”

Much of the financing for the Georgia effort is coming from a combination of government housing and low-income assistance programs including the sale of $54.3 million in “private activity” bonds. The tax exemption on those bonds wound up on the chopping block during the debate over tax overhaul last year, but housing advocates and others were able to save them.

Meantime, about $28 million of debt financing is being provided through programs run by the Rural Housing Service, an arm of the Agriculture Department that dates back to the Farmers Home Administration, which has its roots in the Great Depression.

The Georgia units now being recapitalized were developed under the Section 515 rural-housing program, which was launched in 1962 originally to create low-rent housing for people over 62 years old.

Today, Section 515 properties are available for low-income families and individuals as well as people with disabilities, according to an Agriculture Department spokeswoman.

Since the program launched, 18,426 properties with 563,936 units were created. As of March 31, there were 13,357 properties with 407,826 units in the department’s portfolio, the spokeswoman said.

No new properties were created in 2017, and no new properties are scheduled to be created this year, she said.

Founded in 1988, Greystone is a real-estate lending, investment and advisory firm that is involved with a wide range of housing. The company originated $9.5 billion in commercial real-estate loans in 2017 and has a loan-servicing portfolio of $30 billion.

Greystone has done about 20 deals that have recapitalized and upgraded more than 12,000 low-income-housing units with the same basic structure as the Georgia deal.

“We kind of built a factory,” said Ms. Eastwood.

Hallmark is an owner and manager of about 11,000 affordable-housing units, mostly in the southeast U.S.